Ashley deposits $500 into an account that earns 2% interest compounded 3 times per year. How much money will Ashley have in her account after 4 years?

1 Answer
Tony B
Sep 17, 2016

Note that the 2% is not stated as "per annum" (per year)

Based on 2% per year #->$541.50# rounded to 2 decimal places
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#color(magenta)(" This one is not very likely!")#
Based on 2% per #1/3# year #->$634.12# rounded to 2 decimal places.

Explanation:

#color(red)("Assumption: the 2% is per annum")#

#=>P(1+2/(100xx3))^(3n)# where #n# is the number of years

and the #2/(100xx3)# converts the percentage to #1/3# year equivalent.

#=>$500(302/300)^(3xx4)#

#=$541.4997 ~~$541.50# rounded to 2 decimal places

Tony B
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#color(red)("Assumption: the 2% is per "1/3 " year")#

#=>P(1+2/100)^(3n)# where #n# is the number of years

#=>$500(102/100)^(3xx4)#

#=$634.1208~~$634.12# rounded to 2 decimal places.

Tony B

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